Business is a game. Having a company involves passion and emotion at least until you run out of money. Then you realize that you lost the game.
A game like business is only slightly more complicated than Monopoly and the only major difference is that you don’t have to roll the dice or take a chance on Chance. Essentially, though, the winner has the best bank account at the end.
Of COURSE I’m being simplistic. After all, some people don’t care about money or share their money or give it all away. The thing is, winning or losing in business all has to do with some form of currency. Those who have more than they owe survive. And those who owe more than they have eventually close. There are no exceptions.
I know that deep down in their soft hearts, entrepreneurs are aware that the game must be played out. Bills have to be paid. It does not matter one bit whether the entrepreneur cares about money or doesn’t. The game of business doesn’t care any more than the sun cares whether it will rise or fall. Personal greed has nothing to do with the game. As long as there is more money than bills, you’re a winner.
I am dismayed by the huge number of people, both individuals and entrepreneurs with any number of employees, who have no idea what their financial statements look like. They don’t know how much cash they have in the banks. One client told me that he had no idea what was being deposited to his bank account by one of his customers but that he trusted them to pay what he was billing. Turned out they weren’t by the way.
Ask any couple about their bills or finances and at least one, if not both, will say that they ‘aren’t good with money/finances/bank accounts/credit cards’ so we should ask their partner. And why? ‘Aren’t GOOD?’ How hard do you have to study in order to remember that you carry a checkbook and that your bank balance is written on the ledger inside? If you pay mortgage payments or rent, that’s probably a large sum of money each month. How come you don’t know at least ABOUT how much it is?
I’m a little bit nerdier than most when it comes to finances. I measure my current ratio, my quick ratio and my D-E. I manage my business through a combination of financial projections and cash flow reports. I balance the bank accounts daily and pay payables the same, right when they hit thirty days for the most part. I have receivables on a short leash and spend time reviewing delinquents at least once a week. Really, it’s all kind of fun, at least for me.
To avoid doing any of this is to begin traveling the short road to an out-of-business sign. Anyone who has a business has to know the difference between ‘cleared balance’ and ‘checkbook balance’ in their checking account. I imagine at least one of my pair of followers is shaking your head right now. “Who doesn’t know that?” you are asking. How about the difference between profit and revenue? I have a close friend who has a business and who doesn’t know the difference. He struggles along, by the way, only because he is an expert of the highest degree in his trade.
Yes, this is a rant. I spent time this past week ranting about the very same thing to my management staff. I called it “A Learning Moment” and told them to all balance their checking accounts. I think they giggled at me behind my back.
And I don’t care. Time to start closing the month of October. It is the 30th and I need to be done by November 3rd. Yup, just bragging.